Published 5:30 am, Sunday, July 3, 2011

NBA commissioner David Stern claims that 22 of 30 teams lost money last season.

NBA commissioner David Stern claims that 22 of 30 teams lost money last season.

Photo: Neilson Barnard, Getty

Unlocking reasons behind the NBA's work stoppage

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Unable to come up with a new collective bargaining agreement and seeking enormous changes to its system, the NBA locked out its players Thursday night. The owners have sought a system with a set salary cap and tighter limits on contract length and guarantees. The players prefer to keep the basics of the current system, offering tweaks to the percentage of revenue to be devoted to player salaries.

A look at the issues and circumstances that shut down the NBA:

Follow the money

The NBA claims it was $300 million in the red last season with 22 teams losing money. No matter the accounting that led to those numbers, the owners have negotiated based on those figures and the goal of turning them around, with NBA commissioner David Stern arguing the investment it takes an owner to get into the league should be expected to be profitable.

Players have proposed a reduction in the percentage of basketball-related income they would receive, from 57 percent to 54.3 percent, but argue they should not be responsible for preventing ownership mistakes. Owners seek a more even split.

The owners contend their proposal would guarantee $2 billion annually in player salaries. Players contend that would assure only about 45 percent of basketball-related income.

New blood

Unlike the 1998 negotiations, when much of the league leadership had bought in before the dramatic increase in franchise values, the league is filled with owners such as Boston's Wyc Grousbeck, Phoenix's Robert Sarver, Cleveland's Dan Gilbert and Golden State's Joe Lacob who bought into the league at elevated team prices.

Six owners are also NHL owners. Wizards/Capitals owner Ted Leonsis said the NHL is in better financial shape than the NBA because its CBA prevents owners from taking "stupid pills."

Exceptions

When players say they should not have to protect owners from themselves, they are largely talking about exceptions that have driven up their payrolls. The mid-level exception in particular was designed to protect the sport's middle class but has instead become a contract demand in free agency.

Owners began negotiations by proposing a $45 million hard cap, allowing no exceptions that would exceed that number. They have since proposed a "flex cap" in which teams could exceed the salary cap to an undetermined level, targeting $62 million for typical payrolls.

But players argued that the larger ceiling is, in effect, a hard cap. Last season, 17 teams exceeded the $58 million salary cap.

Player power

Friday will mark the one-year anniversary of The Decision and the consolidation of power of LeBron James, Dwyane Wade and Chris Bosh in Miami. Though there was nothing new about players leaving teams to play with other top players, this move seemed particularly beyond the owners' control, with many teams knowing they had no chance to be considered.

Even the possibility of Deron Williams becoming a free agent led him to be traded more than a year before he could leave Utah on his own. The potential of Dwight Howard or Chris Paul bolting from relatively small-market cities adds to the sense the league is becoming a collection of haves and have-nots.

The ability of teams to offer longer and richer contracts to their own players than to players switching teams no longer seemed likely to keep stars from aligning.

Spending parity

The idea of a luxury tax — a penalty of a dollar for every dollar spent over a specified threshold - was expected to keep teams from buying their way to championships and to redistribute the tax to those that did not exceed the tax threshold.

Though just seven teams exceeded the luxury tax last season, the past four champions were taxpayers.

The past three titles went to this season's top spending teams, Dallas and the Los Angeles Lakers. The Lakers paid $110 million in salary and taxes. Last-place Sacramento spent $45 million.

The rich get richer

The NBA has little revenue sharing. The largest portion of that comes from distributing the money collected from teams paying luxury taxes - money that would be eliminated in the system the NBA has proposed.

Stern has said he wants to triple the league's revenue sharing, but the owners have not come up with an agreement that the players argue would solve many of the problems the owners have sought to remedy by reducing player salaries.

The Lakers' new television deal with Time-Warner Cable could be worth as much as $3 billion over 20 years. Some small-market teams struggle to get a deal that turns a profit. Where the NFL can have extensive revenue sharing based on its national television contracts, the bulk of NBA television revenue is from local deals controlled by individual teams.